How to prepare financially for natural disasters
Natural disasters such as bushfires, cyclones and flooding are an unfortunate part of Australian life. Being as prepared as possible for unpredictable disasters can make a big difference to their impact, and personal finance is no exception.
With our recent bushfire crisis and its devastating effect on homes and lives, many Australians are feeling helpless regarding how they can protect themselves from nature at its worst. Bushfires alone are expected to increase in frequency and severity in coming years, making it important to protect yourself in every way possible.
There are a number of steps you can take to help prepare financially for natural disasters.
1. Review your home and contents insurance
Even if you aren’t expecting severe weather or a natural disaster, it’s always recommended you check your home and contents insurance is up to date and the amount you are insured for is adequate. Research the most common weather events in your location, and ensure your insurance covers these events. Thoroughly read through the product disclosures in your insurance policies and question anything you don’t understand – you want to make sure that you fully comprehend what you are entitled to and covered for. Having an appropriate level of cover can help you handle anything mother nature decides to throw at you, but it’s important not to leave applying for insurance to the last minute. Insurance companies can decline your application if your property is under short-term threat of a natural disaster. The good news is that many Australian insurance companies will offer total replacement cover, including all costs necessary to rebuild your home to the standard it was prior to the natural disaster. To optimise on this, make sure you review your policy every year, and keep your home well-maintained before and during natural disaster season.
2. Review your car insurance
While car insurance is the most commonly held form of insurance, most Australians are actually underinsured when it comes to their policy. This can mean your policy doesn’t cover the damages incurred by a natural disaster and the amount required to get back on the road or purchase a new car. As always with insurance, if you don’t know what something means or need clarification, give your insurer a call and ask for their response in writing.
3. Check your personal insurance
Having the right personal insurance eases the stress of the aftermath of a natural disaster. There is emotional, physical and financial devastation, and it’s important determine what exactly is included in your personal insurance, or get personal insurance if you don’t already have it. Whether it’s life insurance, health insurance or income protection, you’ll feel more secure facing a natural disaster knowing you’ve done everything you can to protect your family’s health, way of life, and finances.
4. Have an emergency or ‘rainy day’ fund
It’s financial literacy 101 to ensure you’re always putting money aside into your savings, and having an additional emergency account or ‘rainy day’ fund is just as important. Take your time and be consistent when saving. We suggest automating the process with monthly transfers set up, making it one less thing on your mind. You’ll have money available if you’re unable to work, or relocating to a safe area which will make all the difference. Natural disasters leave you feeling stuck and helpless, while having an emergency fund already in place will help relieve some of the stress.
5. Make copies of important documents
Keeping back up copies of important documents is vital to rebuilding life after a natural disaster. Keep a virtual back up of your files, whether it be on a USB or in the cloud, as well a physical copy of documents such as your insurance, wills, important prescriptions, bank account information, birth and marriage certificates, medical records, visa/passports and emergency contact details. Having these stored in a safe and accessible place can help ensure an easy evacuation.
6. Withdraw cash
Natural disasters often cause power outages to entire areas, meaning you become stuck when trying to pay for the necessities such as fuel and groceries, with EFTPOS machines not working and no access to withdraw cash. Having a reasonable amount of cash on hand will help you to prepare and evacuate with ease.
7. Business covers
If you own a business, it is important to check your commercial insurance. In particular, your Business Income Insurance, as it covers the loss of income that a business suffers after a disaster. If your team or business is impacted, you don’t want to be left with the clean up and be out of pocket from your savings.
8. Use direct deposits and automatic payments
In the aftermath of a natural disaster, your first thought most likely won’t be your loan repayments or mobile phone bill. By having automatic payments and direct deposits already set up, you won’t be hit with those nasty late fees. If you know you’ll fall short of paying a bill or repayments on a loan, often your credit provider will make allowances if you just pick up the phone and tell them what’s happened. Chances are they will be more than understanding, offering options and solutions to help you through the difficult period.
Unfortunately, natural disasters are a regular occurrence in Australia. While protecting lives is absolutely the priority during a natural disaster, knowing how to set yourself up financially will help you get back on track as soon and as smoothly as possible once the danger has subsided. We hope all our customers are staying safe during the current tumultuous Australian climate – if you have been affected, please get in contact with us as soon as possible, and we will find a solution to help ease any financial pressure you are in due to natural disasters.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or requirements. Therefore, please consider whether the information is appropriate to your circumstance before acting on it, and seek independent advice from a finance or legal professional if necessary
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